I really shouldn't continue on the same topic as last time, but the thing I was most afraid of is happening. According to this article in The Age, those people who didn't have insurance are going to get preferential treatment in dividing up the $200 million in aid. WHY?
No, I'm serious. Why should people who didn't take one of the most fundamental insurances be "rewarded"? Its not as though its expensive. I just did a quick online quote with a major insurer for a fictional 15 year old, 3 Br+ensuite brick veneer house in Kinglake. For home AND CONTENTS insurance, allowing for $50,000 contents and a first homebuyer with no other discounts or insurance history, it costs just $485 per year (paid online, about $45 more offline). If cashflow is an issue and you select the pay-by-the-month option, its approximately $48 per month. Honestly, if you cannot afford that, you cannot afford to buy a house. I cannot comprehend why people don't insure their most important and valuable possession. There is almost no excuse for it, and I really can't see why someone should get a huge chunk more money because they didn't while their neighbour next door, who did the right thing, is "penalised" for having forgone that $48 per month. Think about it - two neighbours: both have had the same inconveniences and expenses, both have lost all their family memorabilia, both have lost family pets. Why should one of them get less purely because they recognised the potential consequences and paid their $48 per month to insure against it?
Sure, a bushfire isn't a regular event (fortunately) - but think of the figures I quoted last time. Every year there are 10,000 house fires, and don't go thinking they can only happen to people who are insured. I don't know how many trees fall on houses each year, but I would guess its at least another 20,000, and I'm pretty sure trees won't be selective and fall only on insured houses. Add to that the costs and risk of a burglary, and risks of the myriad of other natural disasters that may occur without warning to just about any house. Honestly - why would you take the risk?
Alright, so there will be a (very small) number of people who have fallen on genuinely hard times. Let me start by putting the cost into some perspective first. I don't know how much a packet of cigarettes costs, but I'm guessing that's about 1 packet per week, or about 3-4 coffees per week, or a similar number of beers at the local pub. Its probably about 2-3 meals for the family at the local fast food or fish'n'chips in a month, or one half-way decent meal for the family at a moderately priced restaurant. Yes, I am stereotyping (without any evidence to support it). I'll wager, however, that a significant portion of those who would moan that they were uninsured because they could not afford it would be paying at least one of those optional expenses (in the quantities required). Again, I fail to see why the generous Australian public should subsidise the person who wouldn't give up their cigarette, coffee or beer habits - and especially not in preference to the next door neighbour who did give up their habits in order to pay their insurance!
That small remaining percentage of genuinely hard times cases pose a bit of a dilemma - how do we cater for them, without rewarding other people's bad habits. Realistically, I think it is appropriate and necessary to assist them. After all, that is what the Australian spirit of helping a mate in need is all about. In an ideal world, that could be managed at the community level - the smaller communities do tend to have a much better idea of who is "doing it hard" and who isn't. I suspect, however, that the community identity and association necessary for that to work properly isn't as strong in a community like Kinglake as it is in my home village, and I'm not convinced it would work hugely well here.
Failing that, some form of "needs test", with safeguards to limit the number of "undeserving" cases that sneak through, is probably the best way to go. This will be a very small number of cases, so the work involved shouldn't be particularly onerous. They lawyer in me says "a genuine and compelling need" and "circumstances beyond their control" should be the primary criteria. I'm happy to apply more thought to this and expand it further if any of the aid agencies are interested....
My final (for now at least) comments on this issue are in response to a suggestion that maybe insurance should be made compulsory for homes in high fire-risk areas.
My experience has been that it is a condition on every mortgage agreement that you maintain adequate (building) insurance. That either means that a very large number of the houses that burnt down were fully owned (unmortgaged), or it means that its already effectively compulsory and people are ignoring it anyway. And if they were fully owned, that means there are no mortgage payments for the household budget to deal with, which makes that $48 per month a lot more affordable.
Yes, insurance should be compulsory - not just for houses in high fire risk areas, but everywhere. But I have more to say about insurance another time.
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